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46% of small businesses worry about lack of liquidity when reopening

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As businesses across the country are getting ready to reopen, they worry about doing it. This according to a survey by Loan tree. Nearly half of small business owners (46%) fear they won’t be able to afford to resume normal activities after mandatory shutdowns to slow the spread of COVID-19.

According to them, a key challenge that could prevent them from opening is the lack of funding to maintain operations. Some 39% of small business owners say they are concerned that they are not generating enough sales to make the opening worthwhile.



LendingTree reopening small business survey

Their fears stem from compliance with safety instructions which would limit their capacity to 25% or 50%. This, they say, would affect their bottom line. Moreover, fears that their staff will return (5%) will also limit their ability to serve enough customers to make a decent profit. While a majority (52%) expect their entire workforce to return to open, nearly a quarter (23%) say they will do so with fewer staff working fewer people. hours.

Those who plan to get all engines running (54%) plan to notify customers of their reopening by email. To further encourage business, 43% plan to offer promotions or special sales. Another 31% plan to use paid social media ads to promote their business in the first month after reopening. 35% expect to profit from unpaid organic social media content. Less than 9% of businesses say they will withdraw from promoting their business after reopening.

Concerns about a second wave

Despite optimism about the reopening, there are fears of a second wave of infections. More than a quarter of those surveyed (30%) are nervous about having to shut down again if there is another spike in infections.

Despite this, nearly six in ten small businesses are expected to reopen as soon as they are licensed. With 15% saying they’re willing to wait and see before opening, while 26% aren’t sure they’ll ever open.

Only 17% of small businesses say they will get the same number of customers spending the same amount as before the coronavirus outbreak. Even more surprisingly, only 11% of those polled say they are not afraid of reopening.

The challenges of reopening for small business owners

As the outbreak unfolded, businesses were forced to shut down as global supply chains collapsed and closures were imposed. In an effort to help businesses withstand the impact of the covid19 pandemic, business support has come through the Small Business Administration’s Paycheck Protection Program (PPP) and the Federal unemployment pandemic program.

The nation has also seen its unemployment rate rise 14.7% in April. Some states are posting unprecedented unemployment records. Nevada had the highest unemployment rate of 28.2%, followed by Michigan, 22.7%, and Hawaii, 22.3%. Some are hoping that a quick reopening would help get people back to work, but will face the challenge of many businesses operating at partial capacity.

This has led about 63% of small businesses to apply for funding through the Paycheck Protection Program (P3). Of those surveyed, only 44% have received funding while 28% are still waiting to see if their application has been approved.

Even those who have received P3 funding say they still face challenges ahead of the reopening and would need additional cash infusions. In addition, fears remain as to their eligibility for the delivery of the PPP.

Concern over PPP forgiveness

According to the program, borrowers are required to spend at least 75% of the PPP loan funds on salary expenses and no more than 25% on mortgage interest, rent and utilities to qualify for a discount. The terms of remission are based on their ability to spend those funds within eight weeks of receiving their loan.

In addition, any reduction in employees during the eight week period; reduction in salary for any employee beyond 25% of the salary year; compensation exceeding $ 100,000 in wages for individual employees could also affect pardon.

Unless Congress passes a law that would extend that eight-week period, many fear it will not meet the requirement given the uncertain business environment.

Despite financial worries and the lifting of restrictions. Companies will always need to allay the concerns of customers and employees being inside their places of business.

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Here’s Washington’s new fight over small business coronavirus bailout: what to do with the leftover money

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Congress just found over $ 100 billion in extra cash in its paycheck protection program and a Republican senator already has an idea of ​​how to spend it: fixing businesses damaged by riots sparked by the murder of George Floyd by Minneapolis Police.

Senator John Kennedy, a Republican from Louisiana, raised the idea Wednesday with Treasury Secretary Steven Mnuchin during a Senate hearing. As of June 6, the program had 4.53 million loans outstanding, worth $ 511.4 billion. But the loan limit is capped at $ 659 billion and authorization to grant new loans expires at the end of this month, making the full amount unlikely to be needed.

“I am going to present a bill that I would like you and your very capable, and I mean sincerely, that my colleagues at the Treasury consider taking some of this money and making it available to businesses, mainly to companies. small businesses, but businesses that have been lost as a result of fires, looting and criminal riots, ”Kennedy said. “I think they’re going to need some help.

Read also :Small businesses are becoming more optimistic, according to the NFIB, and expect a “short-lived” recession.

Mnuchin said lawmakers gave the Treasury $ 60 billion more than it asked for when the PPP authority was restored in April.

“We hadn’t planned to use some of this extra money, but we would like to work with you to reuse it,” Mnuchin said.

Kennedy said he planned to include a provision in his bill that would require authorities to seek civil damages against looters to help offset the costs of the aid.

Senator Chris Coons, a Democrat from Delaware, had his own ideas of what to do with the surplus: allow companies that had paid off one P3 loan to be able to take on another.

As of mid-May, PPP loans have stalled at just over $ 500 billion as some companies have paid off their loans, others have paid off the money, and new demands have stopped coming in. As of May 30, there was $ 510.2 billion in arrears against 4.48 million loans and as of May 16, $ 513.3 billion had been loaned.

Now see:Some Americans who have been made redundant are returning to work – here are which sectors are rehiring.

The stagnation of PPP loans came as a surprise, given that the initial $ 350 billion tranche was used up in 13 days, prompting Congress to top up the lending authority with an additional $ 310 billion. Although the loan program is an authorization, meaning that there is no real money that will still be available if the authorization is not renewed, the turnaround came as a surprise to lawmakers and d ‘others who were initially concerned that another replenishment might be necessary.

The easing of loan conditions included in a new law signed last week by President Donald Trump could increase the number of loans a bit, but probably only marginally.

Thomas Wade, director of financial services policy at the conservative American Action Forum, said he was “baffled” by the lack of new loans.

He said there were three potential reasons: companies feared potential public relations problems, as has been the case with some publicly traded companies that have taken out and repaid PPP loans; “Fear and uncertainty” about loan terms that might make debt forgiveness less likely and hope that businesses might qualify for the Federal Reserve’s “Main Street” loan programs instead.

While Wade said he believes demand for the program was unlikely to have been exhausted, a recent survey by the National Federation of Independent Businesses indicated that a large majority of its members had already taken out loans. .

The survey, released on June 2, found that 77% of members surveyed had applied for a PPP loan, and of those, 93% had received their money. About a quarter, 24%, of respondents were still in the early stages of their loans, with the program’s initial eight-week lending period ending in July. Under the new law, businesses can now take up to 24 weeks to use the money.

Also see:Who can get a loan through the Paycheck Protection Program?